STRONG warnings against rising ratio of debt service to revenue generation of Federal Government came to the fore again as BudgIT, a civil society organisation, released its 2020 budget implementation report.
According to the report, “debt servicing wiped off 97 per cent (N3.34trillion) of Federal Government’s total revenue (N3.42 trillion) in 2020.
“The group analysed that cost of servicing Federal Government’s debt is drowning Nigeria as the cost continues to grow, gulping a total of N3.34 trillion (97 per cent) from the total revenue. “This means that for every N100 that FG made in 2020, N97 was spent on debt servicing. “This means nearly all Federal Government’s salaries, overhead and CAPEX were financed with loans and CBN support.”
The report noted that total expenditure stood at N10.01 trillion. Fitch Ratings, world’s major credit rating agency, has projected that Nigeria’s debt-to-revenue ratio will rise to 395 per cent by 2022. The rating agency also stated that debt interest cost would consume 24 per cent of the country’s revenue in 2022. Also at the 2021 annual general meeting of African Development Bank (AfDB), its president, Dr Akinwumi Adesina and Director-General of World Trade Organisation (WTO), Dr Ngozi Okonjo-Iweala, warned against impending debt distress.
According to BudgIT, “In 2020, FG projected a total revenue of N5.37 trillion; however, the actual total revenue eventually stood at N3.42 trillion. This represents a 63.71 per cent revenue performance.
“FG’s revenue from oil had a significant boost. “FG’s budget was anchored on an oil revenue projection of N1.01trillion, but as of December 31, 2020, actual oil revenue arrived at N1.41trillion. BudgIT also noted that actual non-oil revenue FG’s stood at N1.26 trillion, despite projections of N1.62 trillion. “This represents a 77.2 per cent performance as of Dec 31, 2020.
“Meanwhile, the Federal Government claimed that it earned zero revenue from stamp duties and Domestic Recoveries+Assets+Fines, despite combined projections of N437bn.”
And despite low revenue of N3.42 trillion revenue, total expenditure was N10.01 trillion, representing 93 per cent performance when compared with the budgeted amount of N10.81 trillion. “Of this 10.01 trillion, N4.65 trillion was spent on non-debt recurrent expenditure.
“A critical highlight with non-debt recurrent expenditure is the actuals on pensions.
“FG disbursed only N359bn of the N536bn budget for pension.”
CAPEX keeps getting the short end of the stick, as only N1.60 trillion was devoted to capital projects in 2020. This is not acceptable! Recall that FG had a CAPEX plan (exclusive of transfers) of N2.69 trillion, this means only 59.5 per cent (slightly over half) of the 2020 projection was actualised. The budget of N428.03 for statutory transfers in 2020 was disbursed. However, there is no breakdown or implementation report of how this money was spent/disbursed.
Reacting to the report, Udemezue John, a serial entrepreneur, said there is a “need to develop an inclusive tax framework in Nigeria,” adding that a bigger population should naturally mean a “bigger economy.”
He urged the government to ignore natural resources and focus on developing human capital and tax them effectively.
Also, Zeal Jacobson, host of Critical Thinking show on radio, queried the zero revenue reported from stamp duties during the year under review.
“How come recoveries and stamp duties for 2020 stand at zero? “At least, the Economic and Financial Crimes Commission (EFCC) has been going to the public with some of the 2020 recoveries. Or do recoveries refer to some other items?”
Executive chairman of the Federal Inland Revenue Service, Muhammad Nami, in July 2020, disclosed that the service collected N66 billion from stamp duties within the first half of the year.
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